SECP relaxation lifts equity market up

LAHORE - The local stock market showed a decent recovery on Friday following the SECP's decision of granting relaxation on IAS 39.
The market which had remained largely in the red zone during the week, recovered 227 points on Friday to close at 5,626 level, up 0.5 per cent WoW. While, the market capitalization of the bourse has now reached $22.2 billion, down 0.6 per cent from last week.
A stock market expert, Atif Zafar, maintained that SECP has finally granted relaxation in the accounting treatment of equities held by companies under 'Available for Sale' category of IAS 39. This relaxation had been demanded by various stakeholders and helped improve market sentiments on Friday.
Dealers said that the gone week witnessed considerable volatile movements both in terms of volume and index level. The benchmark KSE-100 index continued its downward momentum in the four out of five days in the week but bounced back sharply on the last day to not only cover the earlier losses but also earning a net gain of 28.46 points at the end of the week. On the contrary, the average daily volume reflected a heavy fall of 32.96 million shares to 144.03 million shares. The main reason attributed to this was the issue of applicability of International Financial Reporting Standards (IFRS) on the valuation and recognition of the gains and losses of investment portfolios of the companies, especially banks. The week started on a negative note with decrease of 23.96 points on Monday. Tuesday went even worse with a 2.11 per cent decline in the index coupled with lower volumes than previously. The losses in Wednesday and Thursday got restricted to around 5 tenths of 1 per cent with the volume going even lower than 90 million on Thursday. But the market climbed back massively on Friday with a 4.19 per cent increase with volumes also recovering to a large extent. This was because of the news of 1-year waiver to companies regarding the profits and losses on their investments. The market is expected to start the next week carrying the positive effects of this news.
Expert said that on last trading day of the week, after four consecutive volatile and depressed session of the week, bulls showed their complete dominance on the KSE-100 index, soaring sturdily to the 5625.90 point level by gaining 226.54 points and closed convincingly above 5600 points resistance level. Tables were completely turned against the bears with OGDCL, PPL, MCB, HBL, NBP and PTC soaring near to their upper circuit level and collectively contributed 103.72 points to the total index surge. Investors' sentiments were extremely positive following the decision taken by the SECP to allow relief under International Accounting Standard (IAS-39) to the stock listed companies on financial results by issuing a notice KSE/N-747 on Friday. The average volume also remained 19 per cent lower to 144.03 million shares as compared to 176.99 million shares during previous week. Overall ready market volumes improved significantly to 162.438 million shares on Friday as against 89.8 million shares on Thursday.
Dealers said that selling pressure from offshore investors continued during the week as foreigners bought shares worth $14.0 million and sold $23.6 million, resulting in net selling of $9.6m. After a gap of one month, net buying was recorded on Wednesday amounting $0.4m. The cumulative net selling post lifting of the price floor has now reached $189m. Result announcement of MCB Bank has been deferred to the coming week as clarification of IAS 39 was sought. Along with MCB Bank, HBL and AKBL are other banking announcements next week. Moreover PSO, ICI and Fauji Cement would be announcing their results in the coming week.
Average daily volumes in the ready market stood at 144m shares or $55.2m as against 177mn shares ($54.5m), depicting a decrease of 18.6% WoW. Moreover, CFS investment ended the weekend at Rs709m with average annualized rate of 19.45%.